Top line vs bottom line

There are two types of businesses: companies that focus on top-line growth (how much revenue you make) and companies that focus on the bottom line (how much profit you make).

A smaller business that has high-profit margins could be far more valuable than a larger business with much smaller margins for a number of reasons:

• High-profit businesses tend to have good cash flows, which means a cash cushion and money to invest in growth.
• Businesses that operate on low margins are often commoditised, which means they are operating in heavily competitive markets and selling based on price.

Did you know?

High-profit businesses don’t necessarily make more money because they sell high-value products or services. They make more money because the business model is designed to be lean, to evaluate all costs, and to add each additional customer at either no cost or a marginal cost.